Archive for August, 2011

Federal law provides that trusts containing assets of a disabled beneficiary generally disqualify the beneficiary for Medicaid, Supplemental Security Income, and various other disability benefits. However, amounts in certain pooled special needs trusts and individual special needs trusts are not subject to this general rule.

Pennsylvania enacted various restrictions on pooled special needs trusts limiting beneficiaries to people under age 65, requiring beneficiaries to demonstrate a need for the trust, limiting permissible expenditures, and limiting the amount pooled trust sponsors may retain to benefit other disabled people when a beneficiary dies. In the recent case of Lewis v. Alexander, 2011 U.S. Dist. LEXIS 95109, U.S. District Court Eastern District of PA, Case 2:06-cv-03963-JD Document 73 Filed 08/23/11, a federal court invalidated all these restrictions as violating federal law. While the case is in Pennsylvania, it may prove relevant in New Jersey because Pennsylvania and New Jersey are in the same federal circuit and if the State should appeal and lose, the decision may be considered authoritative by other courts.

Your Social Security retirement benefit depends on your earnings history and when you choose to start receiving Social Security. While you can start Social Security retirement benefits at age 62, if you elect to begin Social Security before reaching normal retirement age (“NRA”), your benefit is reduced. On the other hand, SS benefits rise by close to eight percent per year for each year you defer the start up to age 70. NRA varies by birth date, and ranges from age 65 for people born before 1938 to age 67 for people born in or after 1960. For instance, starting Social Security retirement benefits at age 62 yields only about three quarters the benefit you would receive if you waited until NRA to commence Social Security. By the same token, delaying the start of Social Security to age 70 should increase your monthly check by about a third. You can determine your particular early start discount or deferred start premium from the Social Security Administration’s benefit calculator at .

In periods of modest inflation, the eight percent per year premium for delaying the start of Social Security retirement benefits should exceed the annual cost of living adjustment (“COLA”). This makes it more attractive to defer your Social Security start date, and the recent debt ceiling agreement may make deferral even more lucrative. An option being discussed to reduce spending would change the Social Security COLA index to reduce annual COLAs. This would increase the gap between the eight percent per year premium for deferring the start of Social Security and the annual Social Security COLA. Thus, deferring Social Security start date could yield considerably more in lifetime Social Security retirement benefits unless you pass away prematurely.

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